US investment banking giant Merrill Lynch has rejected a role as advisor to a major Turkish defence contractor because of the Turkey's plans to buy missiles from a US blacklisted Chinese company, a local newspaper reported Thursday.

Merrill Lynch was among a number of firms approached by Aselsan to underwrite its second planning share offering, the Hurriyet daily said on its website.

But it said it would not work with Aselsan because of Turkey's plans to buy its first long-range anti-missile system from China Precision Machinery Export-Import Corporation (CPMIEC), Hurriyet said.

Officials from Aselsan and Merrill Lynch were not immediately available for comment on the report.

Aselsan, which is 85-percent owned by the government-run Turkish Armed Forces Foundation and has a current market value of four billion lira ($1.9 billion, 1.4 billion euros), has not disclosed details of its planned secondary offering.

In September, Turkey decided to begin negotiations with CPMIEC, which is under US sanctions for selling arms and missile technology to Iran and Syria.

The move irritated its NATO allies, particularly the United States, which voiced "serious concerns".

NATO has said missile systems within the transatlantic military alliance must be compatible with each other.

Turkey, a NATO member since 1952, has defended its decision to hold talks the Chinese company, but said it was open to new bids should the negotiations fail.

Turkish Foreign Minister Ahmet Davutoglu said earlier this week that ties with the United States were on "honest ground" despite differences on some issues.

The United States in August condemned comments by Prime Minister Recep Tayyip Erdogan in which he accused Israel of having a role in the military overthrow of Egypt's Islamist president Mohamed Morsi.

And US press reports have accused Turkey of turning a blind eye to fighters heading across the border to join Al-Qaeda groups in the Syrian civil war.

Davutoglu said Turkey's approach to some issues may not always "match 100 percent" with its allies.

"A situation like this does not pose a contradiction in our friendly relations with the US, as a matter of fact it indicates that relations are proceeding on a dynamic and honest basis."