The fund is the Market Vectors Rare Earth/Strategic Metals ETF. Launched Thursday under ticker REMX at $20 a share, it tracks the action in the stocks of 24 companies that mine, refine, recycle and produce so-called rare earth minerals. At midmorning, shares were up 1.5% at $20.30.

Rare earth minerals, as you surely have heard by now, are materials produced largely in China (buzzword No. 1) for the sake of making techy things like Apple’s  iPad (buzzword No. 2) and green energy products like wind turbines (No. 3). As emerging markets economies (No. 4) expand, their citizens will buy more phones and TVs and hybrid cars and stuff. They will want, needless to say, to be just like us.

“This is a pretty good emerging markets story,” said Ed Lopez, Van Eck’s marketing director.

But with the world seemingly on the verge of a big trade war (No. 5), China is restricting exports of the rare earths — which has sent their prices soaring and fueled investor interest in alternatives.

Thus the threefold surge (see chart, right) in the past three months of Molycorp , the Greenwood Village, Colo., miner that is aiming to restart a California rare earths mine in 2012. Molycorp is the fifth-biggest holding of the Market Vectors Rare Earth ETF.

Other top holdings include titanium maker Titanium Metals of Dallas and fabricator RTI International Metals of Niles, Ohio. Some observers have wondered whether some of the rare earths plays are overvalued.

But perhaps a bigger question stems from the fact that many of the companies’ shares trade overseas, including in China. Noted short-seller Jim Chanos of Kynikos Associates said at the Economist’s Buttonwood conference this week that his firm’s research suggests that numerous China-based companies have substantial governance and transparency problems, though he didn’t name names.

Van Eck’s circular on the Rare Earths ETF concedes it carries “foreign securities risk,” which comprises among other things “greater market volatility, less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity, political instability and currency risk.”

But Lopez of Van Eck says the rare earth ETF may not be as risky on that count as you’d think. He says that while the vast majority of rare earths are produced in China, the fund’s China exposure is just 15%, in part because the shares of many of the Chinese producers aren’t available to overseas investors.

“We like that we’re diversified across different countries,” said Lopez. “Governments are taking a hard look at where the supply is coming from and you’re going to see that proportion change.”

He says that when production at Molycorp and Lynas, an Australian miner that is the fund’s No. 2 holding, come on line in 2012, they could account for as much as 30% of global production.

Of course, there is another risk –that China will reverse its export restrictions, potentially leading to a value-crushing drop in the prices of such materials as erbium (used in fiber optics), terbium (light bulbs) and of course ytterbium (earthquake monitors).

As Van Eck says in the fund’s marketing materials:

China is currently the primary source of rare earth metals; a ban on the export of rare earth metals, or alternatively a reversal of China’s policies on export limits, could have a significant impact on industries around the globe.

But Lopez counters that focusing on the rare earths part of this equation is to overlook another key exposure the ETF gives investors: to so-called strategic metals, those used in applications like missiles and airplanes. Two-thirds of the fund’s investments reference that sector, which given the world’s bellicosity nowadays doesn’t seem in danger of going into eclipse.

In any case, potential buyers should keep their feet on the earth as they consider buying in. That’s a practice that’s, um, all too rare.