THE Zimbabwe Stock Exchange benchmark index declined slightly yesterday ahead of Independence holiday on blue chip losses. After trades, the industrial index fell 0,5 percent or 0,71 to 132,22 points. Leading the fall was Radar, which lost US7,5c to US10c. Econet was down with US5c to US375c and Innscor lost US1,01c to US56,99c. DZHL declined by US0,95c to close the day at US17c cents.

But the losses were offset partly by gains in BAT which advanced by US5c to US195c and CFI which added 0,40c to US5,40c.

Bindura was the lone gainer among the four resource counters as the mining index marginally increased by 0,6 percent to close at 89,47 points.

Volumes were subdued as about 4,80 million shares valued at US$496 655 changed hands. The value was US$11 000 higher from Monday.

Since confirmation by parties to the inclusive Government that the general elections would be held this year, the market has become far more subdued. Only a few special bargain deals have lifted the market.

Foreign interest has been waning on most listed stocks, except on the highly sought blue-chip counters, such as Delta, Innscor and Seed Co.

The ZSE direction has also been determined by liquidity constraints, which have negatively influenced trading volumes.

Lack of adequate long-term funding for recapitalisation of most companies has been a major contributor to the overall market performance.

Since dollarisation, listed companies have raised equity of approximately US$78,1 million, including convertible debt of approximately US$21,7 million, according to a report by Invictus Securities.

It says the subscription level, averaging approximately 47 percent, has been encouraging, given the liquidity constraints. But equity issuances slowed in 2011 on "unclear" policies and liquidity conditions.

"Many companies are still saddled with high cost debt," noted Invictus.

"This, compounded by operations which have not reached adequate levels to enable consistent repayment of both the principal and interest, negatively affects their profitability.

"Given huge debt overhang and delayed recapitalisation, we estimate that an amount of over US$500 million is required to recapitalise listed companies.

"Some of the large amounts relate to AICO (US$40 million), RioZim (US$60 million), Hwange (US$100 million) and TA Holdings (US$100 million).

"Engaging strategic foreign partners could be used to recapitalise businesses and restructure debt. There has been a lot of foreign interest in Zimbabwean consumer, agribusiness and food processing sectors."

It added that this situation could result in forced mergers and acquisitions as business battles for survival.

"We are also likely to witness increased shareholder activism, especially with regards to business restructuring, given the sluggish performance of some listed entities," the statement said.