Itochu books $1.3 bln Citic charge as Japan's trading houses warn about Sino-U.S. trade spat

Nov 2 (Reuters) - Itochu Corp on Friday booked a $1.3 billion loss on its investment in China’s Citic Ltd , blaming trade tension between China and the U.S. for the writedown on its biggest corporate transaction.

The announcement was made while releasing quarterly earnings as Japan’s trading houses sounded a warning about the Chinese economy and the impact of Sino-U.S. trade friction that is being felt far and wide.

“In light of the current status of the trade conflicts between the U.S. and China, Itochu considered the uncertainty of the economic outlook in China, where Citic Ltd, conducts its primary business activities, was increasing,” the Japanese trading house said.

An executive said the impact of the trade dispute is likely to be worse next year.

Itochu, along with Thailand’s Charoen Pokphand Group, in 2015 invested $10 billion in Citic, taking 20 percent of the Hong Kong-listed unit of China oldest and biggest conglomerate. Itochu’s share was the biggest investment made by a Japanese company into China.

The trading house is taking an impairment loss of 143.3 billon yen ($1.3 billion) on the stake because it uses equity accounting for the investment and judged that Citic’s share price will not recover in the short term, it said.

It also said profit for the six months through September was up 6.4 percent at 258 billion yen. It maintained its forecast for 500 billion yen profit in the year through March 31, 2018.

Marubeni Corp also sounded the alarm about China, along with tension in the Middle East, during its earnings release in which it reported a 45 percent increase in profit.

“Trade frictions in response to U.S. policy and changes in the Middle East situation increasingly cast a pall of uncertainty over the entire global economy,” Marubeni said.

It maintained its forecast for 230 billion yen annual profit.

Sumitomo Corp, which announced earnings on Thursday, highlighted a “lack of transparency in the outlook due to U.S.-China trade issues,” while reporting a 16 percent increase in profit for the six months through September.

Mitsubishi Corp on Friday raised its profit forecast due to higher coking coal output and strong commodity prices.

The company also released a new business plan and aims to boost profit to 900 billion yen in the year through March 31, 2022, from a forecast of 640 billion yen for the current financial year. ($1 = 113.0100 yen) (Reporting by Yuka Obayashi; Writing by Aaron Sheldrick; Editing by Christopher Cushing)