Try the following:

set mylist = ""
for i = 1:1:5 {
    set item = "item"_i
    set mylist = mylist _ $ListBuild(item)
}

zw mylist

$Listbuild lists have a separator that includes the length of the data in the next item of the list. This is why your original code wasn't working - $listbuild(mylist, item) would make a new list with two elements where the first item was the original list.