Britain's online gambling firms switched their sights away from the United States to look for new growth areas on Tuesday after the U.S. Congress passed legislation to end Internet gaming in their biggest market.

Their shares continued to bleed after news of the impending ban wiped out $6.5 billion in share values on Monday.

Sector leader PartyGaming fell more than 11 percent, extending Monday's 58 percent drop, after it canceled its interim dividend to reinvest $115 million, possibly in acquisitions.

Chief Executive Mitch Garber had already stressed the need to reduce the company's dependence on the risky U.S. market last month and hinted at deals in Europe and Asia.

Interactive Gaming Holdings was the sector's only gainer on Tuesday after the small-cap firm announced a move into South Asia through a deal with Curacao-licensed Maharajah Club.

"The alliance will provide IGH with access to the South Asian gaming market at an elementary stage of its development, with a partner who understands its inherent cultural differences," said IGH Chief Executive John Heaton.

"We believe that the South Asian gaming market will be of great significance in terms of IGH's future," he added.

But analyst Paul Leyland at Arbuthnot Securities warned that the transition into Asia would not be easy for other companies without knowledge of the market.

"Asia's not one place, and Asians are not the backward people the U.S.-facing gaming companies hope they are," he said.

CRACKDOWN

Gaming companies were left in shock when the House of Representatives and the Senate unexpectedly approved a bill early on Saturday that would make it illegal for banks and credit card companies to make payments to online gambling sites.

The measure was sent to President George W. Bush to sign into law, which most analysts see as a certainty.

888 shares lost as much as 7.2 percent on Tuesday after it said the move would set the company's performance back to mid-2004 levels.

But 888 reassured investors it would continue its planned expansion in Europe and Asia and would try to convert its U.S. division to one of legal online entertainment.

Sportingbet, owner of the ParadisePoker Web site, remained silent on Tuesday, as did Empire Online.

But analysts pointed out Empire had a cash pile of $260 million and was better placed than most to switch its geographical focus or invest outside the gaming sector.

Analyst Paul Leyland warned that a move into Asia and Europe would not be smooth, particularly in countries such as France where state prosecutors recently arrested two executives from Austria's Bwin.com over alleged gambling offences.

"The U.S. is one of the easiest gambling markets to make money in," he said. "The rest are harder — just ask the people at Bwin."

Last week, European Union Internal Market Commissioner Charlie McCreevy said eight EU countries might be added to a list of seven already facing legal action for refusing to open their betting markets. France is said to be among them.

"McCreevy is an acolyte of free trade ... but at the end of the day, it's the nation states who get to decide their laws," said Leyland.

As gaming companies struggled to realign their strategies, investors struggled to identify those that might not survive.

Shares in World Gaming Plc were down 23 percent at 12-1/2 pence by 1438 GMT after falling as low as 6p when it said it might be in technical default.

"The directors believe it may be in technical default of its loan conditions due to a material adverse change in the circumstances of the business, arising from proposed changes in legislation in the United States," World Gaming said in a statement.