Shares of Genting International and Star Cruises, chosen to build a casino in Singapore, extended their losses today after the cruise operator said it was reviewing the structure of a deal with Macau gaming tycoon Stanley Ho.

The decision by Star Cruises came after the Singapore government sought clarification over the deal, which would give Ho a stake in Genting's minority partner.

Genting International closed down 0.015 Singapore dollars to 0.875, while Star Cruises shares fell 0.030 US dollars to 0.365. The Straits Times Index reached a new record high of 3,252.49 after a gain of 70.28 points.

Star Cruises announced last month it agreed on a deal to give Ho and a group of investors a 6.99 percent stake in the company.

In return, Star Cruises and Genting International - both part of the Malaysian gaming conglomerate Genting Group - were to get stakes in a new boutique hotel and casino to be operated by Ho's Sociedad de Jogos de Macau.

A notice to the Singapore Exchange dated Tuesday said Star Cruises was "reviewing the structure in relation to its investment" in the Macau deal.

The pro-government Straits Times earlier reported that the deal with Ho had "raised a red flag" with Singapore authorities.

The newspaper quoted the casino regulation division of the Ministry of Home Affairs as saying it was "seeking clarification from Star Cruises/Genting International about the share placement and other deals in Macau."

Genting and Star have been chosen to build a US$3.4 billion casino and entertainment complex on Singapore's Sentosa island. Star Cruises holds a 25 percent interest in the Singapore project, called Resorts World at Sentosa, while Genting International owns 75 percent.

Uncertainties not good

It remains unclear what the government is trying to clarify but analysts said the stocks fell based on the news reports.

"It's never good to have uncertainties. Investors and shareholders don't like these kind of negative uncertainties," said Winston Liew, a senior investment analyst with OCBC Investment Research.

US brokerage Merrill Lynch cut its target price for Genting International stocks to 85 Singapore cents a share from 95 cents due to the public focus on the deal with Ho.

"We are concerned that investor sentiment could be eroded, with the prospect of increased media attention focussing on the Singapore government's detailed review of Genting International and Star Cruises' new proposed business in Macau, and specifically the joint venture with Stanley Ho," it said.

Merrill Lynch is keeping its "neutral" rating for Genting International.

CIMB-GK said it had reduced its rating for Genting International to "neutral" from "outperform". The brokerage's gaming analyst Steven Tan told AFP the move was not related to the Singapore government clarifications.

"As far as I see it, the concerns seem to be strirred up by the media," Tan said.