Alibaba's ditch - How bad is it for Hong Kong exchange?

Chinese e-commerce giant Alibaba's decision to list in New York dealt a blow to Hong Kong and has many wondering: what are the implications for the Asian financial hub's competitiveness as an initial public offering (IPO) destination?

Alibaba announced on Sunday that it has started the process of filing for a U.S. IPO, bringing an end to months of speculation about where it would go public. The deal's proceeds are expected to exceed $15 billion, according to Reuters, which would make it the second largest internet listing ever after Facebook's $16 billion IPO last year.

"For mainland companies, Hong Kong continues to remain an attractive destination," Philippe Espinasse, author of 'IPO: A Global Guide' told CNBC on Monday.

(Read more: Alibaba has started plan for US IPO)

"Alibaba's decision was a long time coming. They tried to get their shareholding structure accepted in Hong Kong but it didn't work out. I think an IPO in New York makes sense. There's more flexibility in terms of structures, you have an investor base that understands these sorts of businesses, and there are comparable [listings] - which will get them a better valuation," he added.

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Alibaba, which controls about 80 percent of China's e-commerce, had been in discussions about a listing with the Hong Kong stock exchange and the Securities and Futures Commission since last year, but the city's regulators blocked its proposal as it violated the "one-share-one-vote principle". The principle is that all shareholders should have equal voting rights in public companies and each shareholder should have one vote.

Alibaba has planned an IPO with a shareholder structure that allows a group of top managers and founders to nominate and control the board, while holding only around 13 percent of the company's shares. Last October, the NYSE and Nasdaq approved the company's proposal to let its founder and senior management team have control over the make-up of its board.

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Francis Lun, CEO of GEO Securities says there are some draw backs with a listing in the U.S., however.

"Companies in in the U.S. face frivolous law suits - the legal risk is much bigger there as the Securities and Exchange Commission (SEC) is much tougher," he said.

Lun added that he too doesn't foresee Hong Kong's attractiveness as an IPO venue being dampened.

(Read more: Why the Alibaba IPO is more important than Twitter's)

"I don't see Alibaba's decision to choose New York over Hong Kong as a trend, except for with internet stocks," he said.

Last year, Hong Kong ranked as the second most popular destination for IPOs, after New York. Almost $21.68 billion was raised, compared with $11.46 billion in the previous year, according to Dealogic. By comparison, $44.92 billion was raised in New York last year, compared with $22.47 in 2012.

Alex Wong, director, asset management at Ample Capital said if Alibaba had chosen Hong Kong for its listing, it would have been positive for the city's investment community.

"Hong Kong is largely made up of asset-based companies. We are lacking knowledge-based companies. With Alibaba, it could have changed the way analysts look at and value companies," he said.

Reuters recently polled analysts who put Alibaba's market value at $140 billion.

—By CNBC's Ansuya Harjani. Follow her on Twitter @Ansuya_H