The Observatory issued the Strong Wind Signal No. 3 on Wednesday at 6.40pm.
The forecaster said the signal would remain in force until at least noon on Thursday.
At 7pm, Severe Typhoon Yagi was sustaining maximum winds of about 165 kilometres per hour near its centre. It was forecast to move west at about 10 kilometres per hour across the northern part of the South China Sea and intensify gradually.
The Observatory also said that if Yagi continues to intensify, local winds are expected to further strengthen later on Thursday.
The Observatory said it may need to issue higher tropical cyclone warning signals between Wednesday afternoon and Thursday night.