(Updates with dollar bonds, second trader)
By Duncan Miriri
NAIROBI, Oct 11 (Reuters) - Kenyan stocks and bonds fell on Wednesday after opposition leader Raila Odinga pulled out of a repeat presidential election set for Oct. 26.
The all-share index dropped 0.67 percent and the blue-chip index 1.41 percent, while Kenya's dollar-denominated 2024 sovereign bond fell as much as 1.2 cents, according to Reuters data, as political uncertainty deepened.
Odinga, who successfully challenged the Aug. 8 re-election of President Uhuru Kenyatta last month, said the repeat poll should be canceled and a fresh election held after the election board has carried out reforms.
"There was cautious optimism, but now political risk has risen considerably overnight driven by the opposition candidate's withdrawal," said Ken Minjire, the head of securities at Genghis Capital in Nairobi.
The all-share index has lost 5.5 percent and the blue chip index is down 10 percent since the August election was annulled.
The Kenyan shilling, which fell 0.5 percent after the election was annulled on Sept. 1, was stable against the dollar on Wednesday. Traders attributed that to the central bank's credibility, which is bolstered by healthy foreign-exchange reserves.
It was unclear after Odinga's withdrawal whether repeat elections would be held on Oct. 26. A court ruling on Wednesday said other candidates, none of whom polled more than one percent, could also be on the ballot, possibly giving Kenyatta someone to run against other than Odinga.
The opposition leader has been leading regular protests against the electoral board, and hundreds of his supporters marched through the streets of the capital, Nairobi, on Wednesday.
Concern over the prolonged political uncertainty have hit economic growth, with businesses and households feeling the pinch. The government has already cut this year's economic growth forecast to 5.5 percent from the initial 5.9 percent.
But Aly Khan Satchu, an independent trader and analyst, said he expected the election to go ahead after the court ruled in favour of the minority candidate, ushering in a relief rally afterwards.
"I expect the Oct. 26 election to take place ... We should start to see a recovery at the bourse," Satchu said.
Additional reporting by Karin Strohecker in London; Editing by