Kim shot a six-under 65 to close in on Holmqvist, who had carded a superb first-round 64 on Friday in the 54-hole event.
The 35-year-old Holmqvist, who has never won on the LPGA Tour, made seven birdies and three bogeys.
The Swede she had some nerves heading out as the overnight leader.
"It was nerves in a good way, because it's a position you really want to be in, we work hard to be in," she said.
"But it's just trying to trust my own game and just what I've been working on for the last couple weeks, and it's nice to see that it's paying off," she said. South Africa's Ashleigh Buhai sits three shots off the lead after her 65 and then there are six players four shots off Holmqvist. That pack includes China's Liu Yan and South Korean Jenny Shin along with American Brianna Do and Thai Atthaya Thitikul.
Holmqvist said she couldn't afford to think too much about those hunting her down on Sunday. "Just try and stay in my own bubble and picture the flights and just fall in love with those and just try and execute as good as I can," said the Swede.
Last year's British Open champion Buhai birdied all three par-5 holes and credited her strong recent form on her mindset. "I'm just trying to go out there and play golf, not play for a score, do what I've been doing the last few weeks," she said. "It's helping me play good golf -- as long as I stay in the moment.
"Obviously the par-5s are pretty gettable here. I'm an average hitter out here in terms of length, but today I could get up to like two of them. One played a lot more into the wind than normal, but I made a good up and down from about 75 meters."