Hatton exploited ideal conditions for the early starters to fire a second round of 65 for a halfway total of 10 under par, with South Africa's Brandon Stone, Spain's Jorge Campillo and France's Jeong weon Ko all nine under.
Australia's David Micheluzzi, two shots off the lead after the first day, carded a second-round 73 to fall eight shots adrift of Hatton.
Compatriot Jason Scrivener, who also had an encouraging first round, is a shot further back after also returning a 73.
Competing on the DP World Tour after appealing against the sanctions imposed on him for playing LIV events without permission, Hatton carded eight birdies and a solitary bogey on Friday, although his best shot of the day was a recovery shot worthy of the late Seve Ballesteros on the sixth.
Hatton's tee shot stopped just a few feet from a water hazard and left him facing a 217-yard shot under overhanging tree branches, but the Ryder Cup star hit a superb four iron on to the green to set up an easy par.
"I'd give it seven out of 10," Hatton said with a smile. "Seve probably would have hit it to about five feet but I was just happy to have putter in hand for the next one.
"It was a tricky shot. I got very lucky off the tee, I didn't hit a good tee shot at all and on another day that could have easily gone in the hazard. Definitely rode my luck there and it was nice to hit a four iron onto the green."
Asked if being a strong favourite for the title before play began placed him under extra pressure, Hatton added: "No not really, just naturally the pressure I'd put on myself to go out there and try and play well.
"It doesn't make any difference what the odds are, it doesn't change how you're going to go out there and hit a golf ball. Ultimately I'm going out there to try my best on each shot and that's all I can do."
1°C