(Dow Jones) One of top-performing exchange-traded funds so far in July tracks Chinese real estate companies, as the small ETF has rallied more than 10% amid persistent talk of a bubble in China's property market.

Claymore/AlphaShares China Real Estate ETF (TAO), with $43 million in assets, has rallied about 13% on the month through Friday. The fund invests in Chinese companies and real estate investment trusts open to foreign ownership.

According to manager Claymore Securities Inc., the top five holdings are: Hang Lung Properties Ltd. (0101.HK, HLPPY), Hongkong Land Holdings Ltd. (H78.SG), Link Real Estate Investment Trust (0823.HK), Wharf Holdings Ltd. (0004.HK) and Swire Pacific Ltd. (0019.HK, SWRAY). In all, the ETF holds 42 securities and carries and expense ratio of 0.65%.

After suffering through a steep decline in April and May, the Chinese real estate ETF has bounced back close to its 2010 highs.

The fund, launched in December 2007, tends to closely follow the largest ETF for Chinese stocks, the $8 billion iShares FTSE/Xinhua China 25 Index Fund (FXI). However, the real estate ETF has jumped far ahead of the larger fund during its July rally.

For investors, one risk is the "surge in lending and stimulus spending in 2009, as the government eased restrictions on credit," said Morningstar ETF analyst Patricia Oey in her latest profile of iShares FTSE/Xinhua China 25 Index Fund. "There is concern that bubbles have emerged in the country's housing and stock markets."

Indeed, the large gyrations in Claymore/AlphaShares China Real Estate ETF just this year are a reminder of the volatility of concentrated emerging markets funds.

However, it will be an interesting ETF to watch--if only from the sidelines, for many investors--as the bubble debate plays out.

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