For some reason this happens when animation is applied to a skeletal mesh. Kinda looks like normal map is causing the problem, however when the mesh is placed directly from editor with no animation it looks like it supposed to. Same material is applied to both meshes. What is wrong here?
I found the solution for this problem. It appears that it was normal map skeletal mesh problem after all. When rigging I scaled ue4 skeleton to the mesh size and that what caused it( had to scale mesh to the skeleton size instead), so I had to go to maya and rerrig the mesh to the skeleton standard size(1). After importing back to Ue4 it all looks good. Hope someone will find it useful.
The same thing happened when animator gave me 100 times scaled FBX files. So I reimported my skeletal mesh with the scale factor of 100 and problem has been solved.
