* Cuts FY forecast to 320 bln yen from pvs 400 bln yen
Q2 net profit up 7.7 pct at 106 bln yen
* Nissan most exposed to China among Japan carmakers
* Nissan shares close down 2 pct ahead of Q2 earnings
By Yoko Kubota
YOKOHAMA, Japan, Nov 6 (Reuters) - Nissan Motor Co cut its full-year net profit forecast by a fifth to $3.99 billion, joining rival Honda Motor, after car sales tumbled in China, the world's biggest autos market, amid anti-Japanese protests over a territorial dispute.
Demand for Nissan, Honda and Toyota Motor cars in China was virtually halved due to protests in a row over disputed islets in the East China Sea. Nissan is the most exposed among Japanese carmakers, with China accounting for 27 percent of its vehicle sales.
Nissan and its China joint venture sold 64,300 vehicles in China in October, down 41 percent from a year earlier. China is the company's biggest volume market.
The average forecast of 25 analysts by Thomson Reuters I/B/E/S was for Nissan to earn annual net profit of 378 billion yen. Thomson Reuters StarMine's SmartEstimate, which places greater emphasis on timely forecasts by top-rated analysts, forecast 360 billion yen.
July-September net profit rose 7.7 percent to 106 billion yen ($1.32 billion), Nissan said on Tuesday, despite lower than expected car sales in the United States and Europe. That was well ahead of an average estimate for 91.4 billion yen by seven analysts polled by Thomson Reuters I/B/E/S.
Nissan trimmed its 2012 China sales forecast to 1.175 million vehicles from a previous 1.35 million. Globally, it said it now expects to sell 5.08 million vehicles in the year to end-March, down from a previous estimate for 5.35 million.
``We are gradually seeing signs of recovery (in China). Customers are gradually coming back to dealerships,'' Nissan's Chief Operating Officer Toshiyuki Shiga told reporters, adding that Nissan's China market share dipped to 6.3 percent in July-September from 7.5 percent in January-June.
In the United States, Nissan's second-biggest market, the automaker faced production delays around July for its top-selling Altima mid-sized sedan, which faces intense competition in a crowded mid-size family sedan market from Toyota's Camry, the Honda Accord, Ford's Fusion, and models from GM, Hyundai Motor and Volkswagen .
Nissan's U.S. sales skidded 3.2 percent in October from a year ago, to 79,685 vehicles.
Nissan/Renault are at the forefront of the auto industry's push into electric cars, but Nissan has sold only around 38,000 of its Leaf EV since its launch almost two years ago, underperforming initial expectations as drivers have been put off by the short distances EVs can run without re-charging the battery. With the air conditioner on, the Leaf can run for about 120 km (75 miles). Nissan aims to boost that to about 200 km.
Shares in Nissan, 43.4 percent-held by Renault SA and valued at close to $39 billion, have slipped 2 percent so far this year, trailing Toyota's 26 percent gain and Honda's 3 percent rise. Nissan shares closed down 2 percent on Tuesday ahead of the earnings.