The leading money winner on this year's US LPGA Tour had seven birdies and two bogeys in her round over the Royal Pines resort course.
Jane Crafter had seven birdies in her last 11 holes for a 66 and trails the British golfer by three strokes. Corinne Dibnah and Karrie Webb, two other Australians, and Annika Sorenstam, of Sweden, are two shots further back, with the Scot Kathryn Marshall on 138.
"I've been driving the ball really well,'' Davies said. "That's the key. I've been really straight and if I can keep playing the par fives the same way I'll be in good shape.''