By Shaimaa Fayed and Dina Zayed
CAIRO, May 28 (Reuters) - Egypt's electoral committee declared on Monday that a run-off for the presidency would pit a Muslim Brother against a former ally of deposed leader Hosni Mubarak, but one losing candidate rejected the outcome of a "dishonest" vote.
The committee confirmed that the Brotherhood's Mohamed Mursi and ex-air force chief Ahmed Shafiq had proceeded to the second round of Egypt's first genuinely contested presidential vote.
Mursi topped the poll with 24.3 percent of the votes, followed by Shafiq with 23.3 percent. Turnout was 46 percent.
A Mursi-Shafiq run-off poses an agonising dilemma for many of Egypt's 50 million voters who are equally wary of Islamist rule or a return to a military-backed authoritarian system.
About half of first-round votes went to candidates somewhere in the middle ground - from leftist firebrand Hamdeen Sabahy, third-placed with 20.4 percent, to moderate Islamist Abdel Moneim Abol Fotouh, with 17.2 percent, and former Arab League secretary-general Amr Moussa, with 10.9 percent.
All three filed complaints about the voting, all of which were rejected by the six judges forming the electoral committee.
The disputes add rancour to an already messy and often bloody transition to democracy since generals took over from Mubarak when a popular uprising forced him out on Feb. 11, 2011.
"I reject these results and do not recognise them," said Abol Fotouh, a former Brotherhood member, alleging that votes had been bought and representatives of candidates had been denied access to polling stations during the count.
"The national conscience does not allow for labelling these elections honest," he said.
Of the 12 candidates, only Abol Fotouh has so far rejected the result outright.
"There are question marks on the result of the election," Moussa told a separate news conference earlier. "There were violations, but this should not change our minds on democracy and the necessity of choosing our president."
The Muslim Brotherhood sought to muster a coalition to help Mursi against Shafiq, who calls Mubarak his "role model".
Neither man came close to winning the more than 50 percent of the vote needed to clinch the presidency in the first round.
The close contest has set both contenders scrambling for support, particularly the Muslim Brotherhood, which is trying to draw losing candidates and other political forces into a broad front to prevent a "counter-revolutionary" Shafiq victory.
Shafiq is also seeking wider backing, even posing as a protector of the revolt that toppled Mubarak.
Shafiq's supporters see him as the man to impose security and crack down on protests viewed as damaging to the economy. Mursi appeals to Egyptians keen for Islamists to run a deeply religious country within a democratic framework.
"I would bet that at some stage in the next two weeks there will be an upsurge in violence," said a Western diplomat, predicting than such a flare-up would likely boost the chances of Shafiq, campaigning on a law and order platform.
The military council has promised to lift a hated state of emergency in force throughout Mubarak's 30-year rule on May 31. It has also pledged to hand over to the new president by July 1.
A Brotherhood source, who asked not to be named, said the Islamist group's Freedom and Justice Party had prepared a menu of options to tempt rival groups and politicians to its side.
These include creating a five-member advisory council to advise the president; assigning the posts of prime minister or vice-president to Abol Fotouh and Sabahy; distributing cabinet posts to other parties and offering compromises on planned laws and on an assembly tasked with drafting a new constitution.
So far Abol Fotouh and Sabahy have appeared wary of such overtures, staying away from meetings called by the Brotherhood to discuss strategy for the second round of an election supposed to crown Egypt's turbulent army-led transition to democracy.
Moussa, a former foreign minister once seen as favourite to win the presidency, but who appears to have managed only fifth place, said he would stay in politics but was seeking no post.
"We cannot accept a re-creation of the (Mubarak) regime," he declared, but said he had not yet spoken with the Brotherhood on any anti-Shafiq coalition. "I am not going to consult them, but if they want to consult me, I will consider it."
Uncertainty over the election has hit Egyptian share prices. The main index dropped another 1.3 percent on Monday after suffering a 3.5 percent drop on Sunday, its worst in nine weeks.
"Investors are afraid because now we have two extreme candidates facing one another. No one will invest heavily in Egypt ... until it becomes clear who is president," said Amr Chamel, a trader at Pharos Securities.
"If Shafiq wins, foreign investors will feel at ease but there may be street protests against him. A Mursi presidency would scare off foreign investment."
International ratings agency Fitch said the Mursi-Shafiq contest could "exacerbate social unrest and prolong political stalemate", but said in the longer term both favoured policies that could stabilise Egypt's sovereign credit profile. (Additional reporting by Marwa Awad, Tamim Elyan, Tom Perry, Edmund Blair and Patrick Werr; Writing by Alistair Lyon; Editing by Edmund Blair)